© Reuters. An oil production site run by Civitas Resources is seen near Broomfield, Colorado, U.S, December 2, 2021. REUTERS/Liz Hampton

By David French and Mrinalika Roy

(Reuters) -Civitas Resources said on Tuesday it would acquire oil and gas operations in the Permian basin managed by private equity firm NGP Energy Capital Management for $4.7 billion, expanding its operations into the lucrative shale patch.

The deal is transformative for Civitas, which until now operated solely in Colorado’s Denver-Julesburg (DJ) basin. As well as entering an area considered the heart of the U.S. shale industry, the acquisition will boost the company’s production by 60%, Civitas said in a statement.

Under the terms, Civitas has agreed to purchase a portion of Tap Rock Resources’ assets and all of Hibernia Energy III’s operations. It will pay cash, using a mix of existing reserves and debt, and issue 13.5 million shares to NGP, the statement said.

“Simply put, these transactions make Civitas a better company, and we see tremendous opportunity to add value in the Permian that will complement our leading oil position in the DJ basin,” Civitas Chief Executive Chris Doyle told analysts.

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News of the deal, which Reuters was first to report on Monday, sent Civitas’ shares 8% lower. However, one of its largest shareholders voiced support, noting the transaction will add high quality inventory and portfolio diversification.

“We have great confidence in this team and look forward to watching them execute on this transformative transaction,” Kimmeridge Managing Partner Ben Dell said in a statement to Reuters.

The Permian is an obvious target for producers looking to increase their inventory. The shale patch, which lies between Texas and New Mexico, has the necessary infrastructure and is known for high productivity and large undeveloped reserves.

Denver-based Civitas said the cash the new assets generate would allow it to boost its dividend payments in 2024 by around 20%.

To help the company repay debt it was using to fund the acquisitions, it would halve its $1 billion share buyback target, initially announced in February and to run to the end of next year.

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